Gulf corporate governance falls short of global best practices - S&P | Reuters

Gulf corporate governance falls short of global best practices - S&P | Reuters

Companies in the oil-rich Gulf lag behind international best practices when it comes to considerations such as transparency and risk management, contributing to low foreign direct investment into the region, S&P Global Ratings said on Monday.

After decades of state-driven investments fuelled by petro-dollars, Gulf Cooperation Council (GCC) countries have increasingly become capital importers amid lower oil prices, but foreign investor participation comes with a focus on governance practices and financial transparency.

Meanwhile, strategies to diversify their economies away from oil increasingly rely on a local private sector which remains dominated by family groups, with firms often led by few key stakeholders.

“Many GCC companies operate with concentrated shareholder profiles with relatively limited institutional investor participation,” S&P said in a report.

“Compared with best practices elsewhere, GCC boards are often less independent from ownership. We also note that board members themselves may have less experience and fewer qualifications than similarly positioned directors elsewhere.”